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Your ERISA Watch – Court Denies Insurance Company Chance to Decide “Any Occupation” Disability Claim for Disabled Neurologist; Orders Payment of Benefits

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This week I want to highlight a district court decision, Khan v. Provident Life & Accident Ins. Co., 2019 WL 1970516 (W.D.N.Y. May 3, 2019), that contains a treasure trove of findings that will help claimants with long term disability claims.

The court’s decision comes from its review of the Magistrate Judge’s Report and Recommendation (R&R) denying the parties’ cross-motions for judgment and recommending a plenary bench trial before the district court.  The court rejected and accepted in part the R&R and granted Plaintiff’s Motion for Summary Judgment.  On de novo review of Provident’s decision, the court found that Plaintiff Khan, who became disabled from his career as a hospital neurologist at the age of 49 due to relapsing polychondritis and polyarthralgias, was entitled to Own Occupation and Any Occupation benefits, denying Provident the opportunity on a remand to consider the Any Occupation claim in the first instance.

In coming to this conclusion, the court made several notable findings about disability, based significantly on subjective symptoms of pain and fatigue. The court, using the two-step credibility analysis utilized in the Social Security Disability Insurance context, found that Khan has proven by the preponderance of the evidence that he suffers from medically determinable impairments that could be reasonably expected to produce the pain and fatigue he alleges and they are substantiated by his own statements and the medical records. The court was unmoved by Provident’s protests that Khan’s doctors relied on his subjective complaints, recognizing that a patient’s report of complaints or history is an essential diagnostic tool.

The court rejected Provident’s medical consultants’ arguments that Khan’s symptoms were not credible because his treatment was not “aggressive” enough and that he continued to work even after his doctor completed his disability paperwork.  Though the date of disability was within two weeks of his termination from employment, the records show he was being terminated because he could not keep up the pace at work.  “The fact that Plaintiff persevered in continuing to work despite his chronic fatigue and pain should not be used against him.”  Id. at *14 (citing collection of cases).  Even if Plaintiff could use the computer, do occasional household chores, and grocery shop it does not mean he can perform the exertional and cognitive demands of his job.

The court then considered Provident’s objections to the R&R.  The court agreed with Provident that there was no good cause for the admission of a “Reassessment Summary” that was not created until after the record closed since it was not highly probative on whether Khan was disabled at the time he applied for benefits.  The court also agreed with Provident that evidence that Khan’s other disability insurers found him disabled may not be considered by the court as they are not actually in the administrative record.  The court found no error in the R&R’s consideration of the SSA decision and the weight to be accorded to it under Provident’s claims manual.  The court found moot the R&R’s recommendation for a plenary bench trial since the parties consented to a bench trial “on the papers.”

The court then considered Khan’s objections to the R&R.  The court found that Provident’s interpretation that Khan must submit “objective” evidence is contrary to the policy terms and the remedial purpose behind ERISA.  The court agreed that Provident and its medical consultants arbitrarily ignored Khan’s subjective complaints and evidence regarding the actual vocational requirements of his job and ability to perform them.

Significantly, the court found no reason to remand the Any Occupation claim to Provident because there is no new evidence that could produce a reasonable conclusion permitting a non-arbitrary denial of his claim.  The court noted that the record, in this case, spans 8 years and included the SSA’s finding of disability.  Though Provident could obtain “new” evidence in the form of an IME or FCE, it had ample time and opportunity to do so and chose not to.

When a claim has been denied during the “Own Occupation” definition of disability, most courts will remand the “Any Occupation” determination to the insurance company.  This is so even when at the time of judgment, the “Any Occupation” transition is long past.  See e.g., Ninth Circuit:  Nagy v. Grp. Long Term Disability Plan for Employees of Oracle Am., Inc., 183 F. Supp. 3d 1015, 1032 (N.D. Cal. 2016), aff’d, 739 F. App’x 366 (9th Cir. 2018); Bunger v. Unum Life Ins. Co. of Am., 299 F. Supp. 3d 1145, 1165 (W.D. Wash. 2018); Popovich v. Metro. Life Ins. Co., 281 F. Supp. 3d 993, 1008 (C.D. Cal. 2017); Gallegos v. Prudential Ins. Co. of Am., No. 16-CV-01268-BLF, 2017 WL 2418008, at *13 (N.D. Cal. June 5, 2017); Hantakas v. Metro. Life Ins. Co., No. 214CV00235TLNKJN, 2016 WL 374562, at *10 (E.D. Cal. Feb. 1, 2016); Carrier v. Aetna Life Ins. Co., 116 F. Supp. 3d 1067, 1084 (C.D. Cal. 2015); Sixth Circuit:  Rodriguez v. Life Ins. Co. of N. Am., No. 15-12768, 2018 WL 398444, at *9 (E.D. Mich. Jan. 12, 2018); Chamness v. Liberty Life Assurance Co. of Bos., 234 F. Supp. 3d 885, 896 (W.D. Mich. 2017), appeal dismissed, No. 17-1299, 2017 WL 4216578 (6th Cir. Apr. 21, 2017); Fifth Circuit:  Chavarria v. Metro. Life Ins. Co., 69 F. Supp. 3d 596, 604 (E.D. La. 2014); Third Circuit:  Horn v. Life Ins. Co. of N. Am., No. 5:14-CV-3699, 2015 WL 4477039, at *9 (E.D. Pa. July 22, 2015); Kelly v. Reliance Standard Life Ins. Co., No. CIV. 09-2478 KSH, 2015 WL 3448033, at *2 (D.N.J. May 28, 2015), aff’d sub nom. Kelly v. Penn Mut. Life Ins. Co., No. 18-1162, 2019 WL 990244 (3d Cir. Feb. 28, 2019); Plank v. Devereux Found., 89 F. Supp. 3d 705, 712 (E.D. Pa. 2015); D.C. Circuit: Marcin v. Reliance Standard Life Ins. Co., 199 F. Supp. 3d 94, 102 (D.D.C. 2016), aff’d, 861 F.3d 254 (D.C. Cir. 2017).  You get the point…

The court did something unusual, though certainly not unprecedented, by awarding Any Occupation benefits even though Provident Life did not decide Khan’s eligibility for benefits under this definition of disability in the first instance.  Other courts who have ordered payment of Any Occupation benefits in similar circumstances have found that the disability was well supported by the current record or exhaustion would be futile.  See e.g. Reetz v. Hartford Life & Accident Ins. Co., 294 F. Supp. 3d 1068, 1084 (W.D. Wash. 2018); Wright v. Raytheon Co. Short Term Disability Plan, 2008 WL 4386728, *13 (D. Ariz. Sept. 17, 2008); Oliver v. Coca Cola Company, 497 F.3d 1181, 1199-1201 (11th Cir. 2007) rehearing granted, opinion vacated on other grounds in part by 506 F.3d 1316 (11th Cir. 2009), and adhered to in part on rehearing by 546 F.3d 1353 (11th Cir. 2008); Smith v. Metro. Life Ins. Co., 274 F. App’x 251, 257-58 (4th Cir. 2008); see also Paese v. Hartford Life and Acc. Ins. Co., 449 F.3d 435, 449 (2nd Cir. 2006).

Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.

Attorneys’ Fees

Fourth Circuit

Sims, et al. v. BB&T Corporation, et al., No. 1:15-CV-732, 2019 WL 1993519 (M.D.N.C. May 6, 2019) (Catherine C. Eagles).  Where Class Counsel achieved a $24 million common fund settlement (plus other non-monetary relief) in this ERISA class action alleging wrongdoing with respect to the management of the BB&T retirement plan, the court awarded Class Counsel a fee award of $8 million (1/3 of the common fund), $768,176.42 in litigation expenses, and $20,000 service awards for each of the representatives.  In doing the lodestar cross-check, the court found the following rates of Lead Counsel to be reasonable:  “$1,060 per hour for attorneys with over 25 years of experience, $900 per hour for attorneys with 15 to 24 years of experience, $650 per hour for attorneys with 5 to 14 years of experience, $ 490 per hour for attorneys with 2–4 years of experience, and $330 per hour for attorneys with less than 2 years of experience, law clerks, and paralegals.”  The total lodestar of the two law firms involved amounts to over $13 million.

Seventh Circuit

Trustees of The Suburban Teamsters of Northern Illinois Pension Fund v. The E Company, et al., No. 15 C 10323, 2019 WL 1992962 (N.D. Ill. May 6, 2019) (Judge Thomas M. Durkin).  In this dispute over withdrawal liability, where the Fund was successful and affirmed by the Seventh Circuit, the court granted the Fund’s motion for appellate attorneys’ fees and costs.  The court awarded the Fund $62,312.50 in attorneys’ fees and $106.50 in costs, for which each Defendant is jointly and severally liable.

Class Actions

Fourth Circuit

Sims, et al. v. BB&T Corporation, et al., No. 1:15-CV-732, 2019 WL 1995314 (M.D.N.C. May 6, 2019) (Judge Catherine C. Eagles).  This case involved disputed breaches of fiduciary duties of loyalty and prudence and prohibited transactions with respect to the BB&T retirement plan.  The court granted final approval of the class action settlement creating a common fund of $24 million plus other non-monetary relief.  There were no objections to the settlement.  The average recovery is approximately $342 per class member and some members will receive as much as $10,000.  The court found that the settlement amount is substantial considering the tens of thousands of class members who will recover damages.  The court found that each of the “fairness factors” favor approval.

Disability Benefit Claims

Second Circuit

Khan v. Provident Life & Accident Ins. Co., No. 115CV00811MATLGF, 2019 WL 1970516 (W.D.N.Y. May 3, 2019) (Judge Michael A. Telesca).  See Notable Decision summary above.

Seventh Circuit

Lerch v. Life Insurance Company of North America, No. 18-CV-589-SLC, 2019 WL 1998515 (W.D. Wis. May 3, 2019) (Magistrate Judge Stephen L. Crocker).  The court denied Plaintiff’s motion to exclude the plan’s Appointment of Claim Fiduciary (ACF) form and Group Disability Insurance Certificate from the administrative record.  Plaintiff argued that these documents should not be included because they were not part of the documents that LINA sent to Plaintiff’s counsel when counsel requested the complete claim file and all plan documents a few days into the litigation.  The court concluded that there was no statute “or case law that requires the exclusion from the administrative record of any plan documents that a claim administrator or claim fiduciary (versus a plan administrator) failed to provide a claimant upon request.”

Eighth Circuit

Dapron v. Spire, Inc. Retirement Plans Committee, No. 4:17 CV 2671 JMB, __F.Supp.3d__, 2019 WL 2003862 (E.D. Mo. May 7, 2019) (Judge John M. Bodenhausen).  Plaintiff brought a claim for benefits and breach of fiduciary duty related to the denial of his disability retirement benefit for which he applied six years late.  The court declined to consider evidence Plaintiff presented that was not raised prior to the conclusion of the administrative claims process “because the Court can consider only the evidence that was before the administrator when the claim was denied.”  The court concluded that the Committee acted within the written terms of the Plan in denying benefits because the Plan requires that the claimant “is employed” in order to qualify for benefits.  At the time he applied, Plaintiff had not been employed for six years.  On the breach of fiduciary duty claim, the court previously determined that the Committee was not required to consider Plaintiff’s extenuating circumstances (mental illness) when interpreting the Plan.  Further, no employee had been allowed to wait six years to file a claim or to submit a claim after terminating employment.  The denial was based on substantial evidence.

Ninth Circuit

Coleman-Fire v. Standard Insurance Company, No. 3:18-CV-00180-SB, 2019 WL 2011039 (D. Or. May 7, 2019) (Magistrate Judge Stacie F. Beckerman).  The court found that Plaintiff, a former attorney, cannot perform her Own Occupation and is entitled to long term disability benefits due to the effects of “debilitating TBI/PCS symptoms, including, but not limited to, fatigue, lack of stamina, incapacitating headaches, and cognitive weaknesses, particularly in processing speed, memory processing, attention and concentration, and complex visual learning.”  The court found Plaintiff’s examining physicians to be more credible and the court also relied heavily on third-party observations of Plaintiff’s deteriorating abilities and work performance.  The court rejected Standard’s argument that Plaintiff is not entitled to benefits because she failed to demonstrate that her continuous disability was not caused or contributed to by a Mental Disorder.  Standard contends that she must prove that “a non-limited condition is the exclusive cause” of her continuing disability.  The Court disagreed because Plaintiff has adequately established that her TBI/PCS symptoms prevent her from working in her Own Occupation and any post-accident changes in her mental condition were temporary and symptomatic of her TBI/PCS.  Regarding clarification of Plaintiff’s future rights, the court ordered Standard to pay her benefits for the maximum duration absent showing of improvement in her TBI/PCS symptoms that a reasonable physician would conclude that she could work more than forty hours per week in her Own Occupation.

ERISA Preemption

Fourth Circuit

McCarty v. Exelon Corp., No. CV TDC-18-1944, 2019 WL 1980669 (D. Md. May 3, 2019) (Judge Theodore D. Chuang).  This case involves a dispute over the calculation of survivor pension benefits payable to an ex-spouse.  The court found that Plaintiff’s state court lawsuit seeking a declaratory judgment regarding the meaning and proper interpretation of a QDRO issued by a state court is, in substance, a claim for benefits under an ERISA-governed pension plan.  Plaintiff’s claim depends on the existence of the Plan and conflicts directly with an ERISA cause of action.  Thus, Defendant properly removed the action to federal court.

Ninth Circuit

California Spine and Neurosurgery Institute v. Boston Scientific Corporation, No. 18-CV-07610-LHK, 2019 WL 1974901 (N.D. Cal. May 3, 2019) (Judge Lucy H. Koh).  The plaintiff provider alleged breach of oral contract and promissory estoppel against Defendant for payment of services it rendered to its patient covered by an ERISA-governed health plan.  Defendant removed on the basis of ERISA preemption.  The court granted Plaintiff’s motion to remand because Plaintiff could not have bought its claim under ERISA § 502(a)(1)(B).  Under Ninth Circuit law, ERISA does not preempt the claim of a third-party provider who sues not as an assignee of an ERISA beneficiary, but as an independent entity claiming damages.  The court did not discuss the second prong of the Davila test since the first prong is not satisfied.

Exhaustion of Administrative Remedies

Fourth Circuit

McCarty v. Exelon Corp., No. CV TDC-18-1944, 2019 WL 1980669 (D. Md. May 3, 2019) (Judge Theodore D. Chuang).  The court dismissed Plaintiff’s lawsuit, without prejudice, for failure to exhaust administrative remedies.  Plaintiff disputes the company’s interpretation of her QDRO but did not formally file an administrative claim or appeal with the pension plan.  She only “attempted to remedy the situation with Defendant’s representatives to no avail.”  The court noted that she still has time to exhaust.  According to the Plan, she would have one year to re-file her lawsuit after an adverse determination and the parties also agreed to toll the statute of limitations on her filing of a federal claim.

Fifth Circuit

Zerangue v. The Lincoln National Life Insurance Company, No. CV 19-1939, 2019 WL 2058984 (E.D. La. May 9, 2019) (Judge Martin L.C. Feldman).  Plaintiff filed this lawsuit for long term disability benefits before filing a claim with Lincoln National, claiming that it would be futile since Lincoln National denied her short-term disability claim and two internal appeals.  The court agreed that it would be futile since the STD and LTD definitions of disability are the same during the elimination period and it is the same decisionmaker, however, the court noted there is no long term disability record to review since Plaintiff never filed a claim.  To consider her claim absent an underlying decision by Lincoln National for the court to review would frustrate the purpose of the exhaustion doctrine.  The court dismissed the LTD claim without prejudice and stayed the proceedings until she has exhausted her administrative remedies with respect to the LTD claim.

Life Insurance & AD&D Benefit Claims

Fifth Circuit

Story v. AT&T Corp, et al., No. CV 19-1185, 2019 WL 2060143 (E.D. La. May 9, 2019) (Judge Jay C. Zainey).  The court denied Plaintiff’s motion to dismiss MetLife’s ex parte motion for interpleader.  Plaintiff was the decedent’s spouse.  Though the decedent’s children communicated that they did not object to the payment of the life insurance benefits to Plaintiff, the court’s review of correspondence between MetLife and the children’s attorney led it to find that there may be an adverse claimant.  Because the court is unable to find that MetLife is 100% disposed of future liability by the children, pursuant to the Fifth Circuit’s liberal interpretation of interpleader, the court denied the motion to dismiss.

Sixth Circuit

Nor-Cote, Inc. v. Reliance Standard Life Insurance Company, No. 18-CV-13051, 2019 WL 2022182 (E.D. Mich. May 8, 2019) (Judge Bernard A. Friedman).  The court concluded that Plaintiff is entitled to the death benefit under the policy because the decedent met the “active work” requirements and was covered under the life insurance policy.  The court found that the preponderance of the evidence shows the decedent was working at least 30 hours per week where, plaintiff informed Reliance Standard that, “as a co-owner of Nor-Cote, Barbara Grouse did not punch a time card and that her apparently low earnings of $10,000 per year were due to the fact that, as is customary in the industry, she would forego pay when the company was not doing well in order to keep the company running, which also explained why plaintiff could not produce any pay stubs for her.” (internal citations omitted).

Ninth Circuit

Masuda-Cleveland v. Life Insurance Company of North America, No. 17-17149, 2019 WL 2024835 (9th Cir. May 8, 2019) (Before: D.W. NELSON, FERNANDEZ, and BEA, Circuit Judges).  In this dispute over accidental death benefits, the court vacated and remanded the district court’s grant of summary judgment in favor of LINA.  In its final denial of the claim, LINA relied on a new report to support a new position that the death was not caused by the injuries sustained in an accident but was caused by a fatal cardiac event.  The district court did not allow Plaintiff to submit rebutting evidence for its consideration.  The court found that this was in error.  The court found that a higher degree of skepticism should apply because (1) “LINA never directly contacted the original physician forensic-pathologist who conducted the autopsy”; (2) LINA obtained a new report after Plaintiff submitted the appeal and used that report to uphold the decision on a different basis; and (3) “The evidence that the decedent actually had a fatal cardiac event was weak.”  The court can only speculate about the decision the district court would have reached had it considered the above.  For that reason, the court vacated the judgment and remanded to the district court for further proceedings.

Medical Benefit Claims

Tenth Circuit

Anne M. v. United Behavioral Health, No. 2:18-CV-808 TS, 2019 WL 1989644 (D. Utah May 6, 2019) (Judge Ted Stewart).  In this dispute over the payment of residential treatment under a self-funded health plan, the court granted in part Defendants motion to dismiss.  On the second cause of action under the Mental Health Parity and Addiction Equality Act, the court explained that Plaintiffs can make an as-applied challenge by alleging that the mental health or substance abuse services at issue meet the criteria imposed by the insurance plan and that the insurer imposed some additional criteria to deny coverage of the services at issue.  Here, Plaintiffs did not adequately allege facts to support their claim that UBH applied less rigorous standards when evaluating analogous medical/surgical claims.  The court gave Plaintiffs the ability to amend the Complaint.  On David’s individual ERISA claim, the court noted that there was no allegation that he was a participant, beneficiary, or fiduciary so his claim is subject to dismissal.  However, he can continue to as E’s guardian to assert claims on her behalf.  Anne, on the other hand, is a plan participant.  She has statutory standing to assert an individual claim since Anne and David paid for the residential treatment for which they seek reimbursement.  She has standing under ERISA Section 502(a)(3) because the relief sought under this provision is broader and does not depend on the recovery of benefits.  She has sufficiently alleged injury to have constitutional standing.

Pension Benefit Claims

Ninth Circuit

Cuevas v. Resilient Floor Covering Pension Trust Fund, No. 18-CV-03741-PJH, 2019 WL 2029068 (N.D. Cal. May 8, 2019) (Judge Phyllis J. Hamilton).  In this dispute over pension benefits based on an alleged misclassification of job title (floor covering handler v. apprentice), the court denied the Fund’s motion for summary judgment, granted Plaintiff’s motion for summary judgment, and remanded to the Board for de novo consideration of Plaintiff’s application for pension benefits in compliance with the Plan’s requirements.  The court determined that the parties “veered substantially from the Plan’s procedural requirements. Cuevas raised his misclassification argument, which is the only argument he relies on today, for the first time in August 2017 after a number of rejected applications or appeals. The Board never issued a denial in writing explaining the specific reasons for its adverse determination, referring to the specific Plan provisions on which the denial was based, or explaining what information was necessary for plaintiff to perfect the claim and why it was necessary. Under these circumstances, the Board’s denial of benefits was an abuse of its discretion. As a result—and unsurprisingly—the record is insufficient for this court to review.”

Pleading Issues & Procedure

Second Circuit

Whelehan v. Bank of America Benefit Appeals Committee, No. 18-2668-CV, __F.App’x__, 2019 WL 2024816 (2d Cir. May 8, 2019) (Present: Kearse, Wesley, Chin, Circuit Judges).  The court affirmed the dismissal of Plaintiff’s lawsuit seeking retirement benefits on the basis of res judicata.  “All of Whelehan’s claims as to BoA’s 2017 failures to respond or provide documents, and its alleged failure to administer the Plan solely in the interest of participants, are relevant only if Whelehan was a Plan participant during the period for which she seeks (and previously sought) benefits. These claims in the present litigation were properly dismissed because Whelehan had already litigated her claim to the same pension benefits and had failed to establish that, at the time relevant to her claim to benefits, she was a Plan participant.”

Third Circuit

McCarrin v. Pollera, et al., No. 17-CV-1691, 2019 WL 1979617 (E.D. Pa. May 2, 2019) (Judge Lynne A. Sitarski).  In this dispute over pension benefits, the court denied Plaintiff’s Motion to Strike Defendants’ Exhibits to its motion for summary judgment because Plaintiff has failed to show the Exhibits would be inadmissible at trial.

Provider Claims

Second Circuit

MC1 Healthcare, Inc. v. United Health Grp., Inc., No. 3:17-CV-01909 (KAD), 2019 WL 2015949 (D. Conn. May 7, 2019) (Judge Kari A. Dooley).  The court agreed with Plaintiff that the Assignment of Benefits form constitutes a legal assignment of the right to receive payment and the right to sue under ERISA for nonpayment.  However, the assignment does not confer onto Plaintiff derivative standing to seek injunctive relief.  Thus, the court dismissed the portions of the Amended Complaint seeking injunctive relief.  The court also determined that Count I seeking payment of benefits does not comply with the pleading requirements of Rule 8.  “Without knowing whose rights Mountainside purports to assert, or the plans under which those rights allegedly derive, United does not have fair notice as to the claims asserted and cannot defend the claims in a meaningful or orderly manner.”  “Nor does the Court require any particular format for presenting the individual ERISA claims. The claims can be grouped by plan, or Mountainside could amend its claim to allege a separate count for each patient whose rights are asserted. In whatever manner Mountainside chooses to replead, the notice concerns at the core of Rule 8 must be adequately addressed.”

Retaliation Claims

Fourth Circuit

Miller v. CSX Transportation, Inc., No. GJH-18-2022, 2019 WL 1992105 (D. Md. May 3, 2019) (Judge George J. Hazel).  “According to the Amended Complaint, Plaintiff was terminated because he sought to access continued leave benefits. As described above, Defendant’s position that Plaintiff was fired, not for requesting continued leave, but for job abandonment is refuted by Plaintiff’s allegations, assumed to be true at this stage, that Plaintiff demonstrated he had not abandoned his position but was on approved medical leave. The Amended Complaint also includes factual allegations that support Plaintiff’s claim that his firing was part of a pattern or practice by Defendant to interfere with employees’ access to benefits. Thus, Plaintiff has sufficiently pled that he was discharged or discriminated against for exercising his rights under ERISA, and Plaintiff’s ERISA claim will not be dismissed.”

Withdrawal Liability & Unpaid Contributions

Third Circuit

Trustees of The Insulators Local No. 23 Annuity, Pension, and Health and Welfare Funds v. Loshaw Thermal Technology, LLC, No. 1:18-CV-537, 2019 WL 2005650 (M.D. Pa. May 7, 2019) (Christopher C. Conner).  In this lawsuit seeking to recover delinquent benefits contributions from June 2015 through May 2018 and to remedy the derivative breach of fiduciary duty arising out of defendants’ failure to make requisite benefits contributions, the court granted summary judgment to Defendants.

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